How to Report Crypto Income in Canada: Your 2024 Tax Guide

Understanding Crypto Taxes in Canada: Why Reporting Matters

With cryptocurrency adoption soaring, the Canada Revenue Agency (CRA) has intensified scrutiny on digital asset transactions. Failing to report crypto income accurately can trigger audits, penalties, or legal consequences. This guide breaks down exactly how to declare cryptocurrency earnings on your Canadian tax return—whether you’re trading Bitcoin, earning staking rewards, or receiving NFTs.

What Qualifies as Taxable Crypto Income in Canada?

The CRA treats cryptocurrency as property, not currency. These activities typically generate taxable events:

• Trading: Selling crypto for fiat (e.g., CAD/USD) or swapping between coins (e.g., ETH to SOL)
• Mining: Rewards received from validating blockchain transactions
• Staking/Yield Farming: Earnings from locking crypto in DeFi protocols
• Airdrops & Hard Forks: Free token distributions (valued at fair market price)
• NFT Sales: Profits from selling non-fungible tokens
• Crypto Payments: Receiving digital assets for goods/services

Note: Simply holding crypto or transferring between your own wallets isn’t taxable.

Calculating Crypto Gains and Losses: Capital vs. Business Income

Your tax treatment depends on whether the CRA views your activity as investment (capital gains) or business income:

• Capital Gains: Apply if you occasionally trade. Only 50% of gains are taxable. Calculate using:
  Proceeds – Adjusted Cost Base (ACB) – Expenses = Capital Gain/Loss
• Business Income: Applies to frequent/high-volume traders or miners. 100% of profits are taxable.

Key Calculation Steps:

1. Track every transaction’s date, value in CAD, and purpose
2. Determine ACB (average cost per unit when acquired)
3. Subtract ACB and allowable expenses (e.g., trading fees) from proceeds

Step-by-Step Guide to Reporting Crypto on Your Tax Return

1. Gather Records: Compile exchange statements, wallet addresses, and transaction histories.
2. Calculate Gains/Losses: Use crypto tax software (e.g., Koinly, CoinTracker) or spreadsheets to compute ACB and net gains.
3. Report Capital Gains: File Schedule 3 with your T1 return. List each asset’s proceeds, ACB, and gain/loss.
4. Report Business Income: Include profits on Form T2125 (Statement of Business Activities).
5. Disclose Foreign Assets: If holding >$100,000 CAD in foreign exchanges, file T1135.

Top 5 Crypto Tax Mistakes to Avoid

• Ignoring Small Transactions: Even $10 trades are reportable.
• Incorrect ACB Calculation: Using FIFO instead of average cost or missing fee deductions.
• Not Reporting Global Income: Canadian residents must declare worldwide crypto earnings.
• Mixing Personal & Business Wallets: Keep them separate for clean records.
• Missing Deadlines: Taxes are due April 30, 2024, for 2023 income.

Essential Tools for Crypto Tax Compliance

• Tax Software: Koinly, CryptoTaxCalculator, or CoinLedger auto-generate CRA-compliant reports.
• CRA Resources: Guide T4037 (Capital Gains) and crypto-specific FAQs.
• Professional Help: CPAs with crypto expertise (expect $200-$500/hour).

FAQ: Crypto Taxes in Canada

Q: Do I pay tax if I transfer crypto between exchanges?
A: No—transfers aren’t taxable events unless converting between assets.

Q: How is staking income taxed?
A: Rewards are taxable as income at fair market value when received. Later sales trigger capital gains.

Q: What if I lost money on crypto trades?
A: Capital losses offset capital gains. Unused losses carry forward indefinitely.

Q: Can the CRA track my crypto?
A: Yes. Since 2021, Canadian exchanges must report user data. The CRA also uses blockchain analytics.

Q: Are NFT sales taxable?
A: Yes—profits from sales are capital gains. If creating/selling NFTs as a business, it’s business income.

Always consult a tax professional for personalized advice. Keep detailed records—the CRA can audit returns up to 6 years retroactively.